The title describes many households these days, including many with substantial incomes. The month is not over, but all the money is gone, leaving nothing in reserve and certainly nothing to save. Unlike some common political perceptions, this problem afflicts upper-income households too. Expensive mortgage payments, multiple car payments, inflating health insurance costs and the rapidly escalating cost of college can cause formerly “well-off” households to wake up at the end of the month with nothing left from the paycheck—but unpaid bills.
First Pay Yourself—the Future Is Not That Far Away
Wise employees who still can, have money taken out of their paychecks before they receive them. This can go into a savings plan (if the employer has one) or better yet, into a tax-deferred 401(k) plan with an employer match. When an employer is willing to match employees’ 401(k) contributions, this is like “free money.” No investment plan compares to that level of return.
Some employers suspended the 4 01(k) matches during the recent downturn, but as things pick up, many will resume. This is a great savings tool since the money goes in pre-tax. The amount of the match is often dollar for dollar or at least one-half or one-third the employee contribution
The fear about the viability of Social Security in the distant future is well founded, but moreover, Social Security won’t fund a lavish lifestyle. Company plans and some retiree pensions are being reduced or even eliminated. That means money set aside in 401(k) plans might form the bridge between a meager “retirement” and a comfortable one.
Necessities Make Good Gifts
Going back to the here and now, households that never worried before and run out of money before the month ends have several problems. They need more income (difficult these days) or manageable ways to curtail expenses. One approach to doing this is to give “needs” as “gifts.” This is not “stingy.” It is practical. That new pair of designer jeans or trendy sneakers and a nice birthday gift might not both be affordable. Better to wrap up the jeans or sneakers than to give something “nice” but “unnecessary” (or frivolous) that will end up sitting in the corner a few days after the occasion.
More and more consumers have turned to favoring spending on necessities during downturns, because money is tight. Tough economic times mean changing a lot of old habits. Look at the chart below to see the ways consumers are tied to make the end of the month and the end of the paycheck match up better when gas prices were way up. A similar approach works any time.
Return to Simpler, Happier Days—As A Family
If perceptions are correct and many people would rather “go back to a simpler time,” perhaps economic conditions are pushing them that way. Stay-at-home recreation is certainly cheaper than going out.
A night at the movies, plus a stop at the concession stand for a family of five can cost $75 or more. The same event using rental videos (Netflix, Pay-per-view, or Video Store rentals) with homemade popcorn, and with grocery store soft drinks might cost $15, an 80% savings. That’s a huge difference, and doesn’t even consider gas and wear-and-tear on the family car.
Another benefit is that family values and good behavior are better learned playing games around the kitchen table than playing expensive video games at a pay-per-play arcade. A deck of playing cards can be purchased for as little as a dollar or two.
And, if pride doesn’t get in the way, the increased quality of stores selling used merchandise offers big savings, especially for kids and teens who think well-worn clothes are “cool.” Stores like Goodwill Industries, Play it Again Sports, Once Upon a Child and Plato’s Closet offer big savings on everything from high chairs to prom dresses.
True Sentiments Don’t Cost Much to Express
Finally, one of the best savings ideas is to avoid the deluxe $5-10 greeting card, and head toward the 99-cent rack (or make one on your computer?). A heartfelt handwritten note in an inexpensive greeting card will mean much more than the finest poetry—or music—in an expensive card. The handwritten one becomes a keepsake. The fancy, but impersonal one, becomes part of next week’s trash.
One of these days, the economy will improve, but using these sensible and sensitive ways to make the paycheck last as long as the month does, is a habit that will allow savings for really important things—like college or memorable travel.
